Venture capital funding in Minnesota bounced back in the third quarter from a dismal first half of the year, but 2013 is still shaping up as a down year.

Young companies attracted $84.8 million in nine deals, and the lion's share went to medical device firms.

But the medical device industry that's so crucial for Minnesota's economy is still attracting below-average venture funding, according to the MoneyTree Report by the National Venture Capital Association and Pricewaterhouse­Coopers (PwC), using data from Thomson Reuters.

"The cost of developing a product has gone up," said Shaye Mandle, the chief operating officer for LifeScience Alley, a trade association. "There are other places to invest and get a better return today."

Overall venture funding in Minnesota was roughly flat compared with the third quarter a year ago, even though venture capitalists nationally had their most robust quarter since early 2011.

Since 2009, Minnesota has averaged $243.6 million in venture capital investments each year on 37 deals per year. In order for Minnesota to match that this year, the state would need 15 deals totaling $93 million in the fourth quarter.

"It would be a stretch for the fourth quarter to get the number of dollars and deals for the year to be consistent with the last few years," said Mark Scholtes, a Minneapolis-based partner for PwC. "Is it possible? Yes, but it's a stretch."

The lengthy regulatory process for medical devices is scaring off venture capitalists, something the industry has been saying for years, Scholtes said.

The regulatory process is beginning to improve, Mandle said, but companies are shifting plans to adjust for the medical device tax that's part of the federal health care overhaul. Shrinking reimbursements from insurance companies and the federal government aren't helping attract investment.

Medical device companies nationally had a decent third quarter, raising $566 million in venture capital, a 12 percent increase over the same period a year ago. That's an encouraging sign for Minnesota's heavy concentration of medical technology entrepreneurs, but it's not good enough, Scholtes said.

"I would love to say it's stabilized and it's trending up, but I'm just cautious given all the challenges that we've been talking about for several years," he said. "It's still below the historical years of 2005 and 2006."

The biggest Minnesota deal in the third quarter was $29.6 million raised by Minneapolis-based CVRx Inc., which develops implantable devices designed to control high blood pressure. Firms like Nxthera — $18.2 million — and Respicardia — $10 million — also did deals in the third quarter.

Nationally, venture capitalists are mostly chasing software investment, which offers quicker returns. Software firms attracted $3.6 billion of the total $7.8 billion invested in the quarter.

"Software companies typically have a shorter time frame to a liquidity event, and typically software companies require less capital than medical device and clean tech companies," Scholtes said.

The top deal in the U.S. in the third quarter was a $258 million round of funding for Uber Technologies, a San Francisco-based on-demand car service. The investors were Google Ventures and TPG Capital.